Confidentiality Agreements: Do's and Don'ts

Many growing companies face challenges in gaining an advantage on their
competitors or develop a new product that will forever change their industries.
However, accomplishing these goals may require assistance from other parties,
which may mean exposing ideas, business plans,
patents, and perhaps
trade secrets.

In these type of situations, a
confidentiality agreement, or a nondisclosure agreement (NDA), must be created. It is a contract
whereby one party agrees to disclose otherwise confidential information,
while the other party agrees to not disclose any confidential information
to others.

The following are guidelines you
should follow before signing a confidentiality agreement:

Restrict the scope of your confidentiality agreement to the evaluation
of disclosed materials. The contract shouldn’t establish business
responsibilities between both parties nor allow the receiving party to
utilize your confidential materials for their own interests.

Specifically establish the materials or information which need protecting.
It’s important to understand that the receiving party will want
to refrain from being limited in its own recent or future development
efforts without being afraid of future court litigation due to the confidentiality
agreement.

Determine how information will be verified as confidential upon provision
to the receiving party. This includes how spoken communication about said
information is covered.

Compensate the business should the receiving party disclose any or all
confidential materials or information. It’s imperative to state
how and where your company can recover their financial compensation if
the contract is breached, since the confidential information is your business’
main asset.

The following is what you
should not do before signing a confidentiality agreement:

Abide by oral agreements and believe they are valid. The parties are only
obligated to follow what’s in writing.

Sign any agreement which assigns any of your company’s rights aside
from the right to cover the confidential information.

Disclose more than necessary. The less that can be disclosed, the less
that can be stolen from your company.

Agree to any stipulation which allows the receiving party to use your ideas
or anything not marked “confidential” to be not protected
by the confidentiality agreement.

Disclose any information to the receiving party before they sign the agreement.

The information on this website is for general information purposes only.
Nothing on this site should be taken as legal advice for any individual
case or situation. This information is not intended to create, and receipt
or viewing does not constitute, an attorney-client relationship. Dossey & Jones PLLC is not an accounting or CPA firm.

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